When to use a Top-up and the conditions applied

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When to use a Top-up and the conditions applied
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• A home loan top-up, true to its name, is a
  facility of availing further funds on an existing
  home loan.
• When you have a loan that has already been
  disbursed and under repayment and if you need
  more funds, why go about the loan formalities all
  over again?
• Thus, the purpose of a top-up loan is to make
  superfluous loan dispersal on a pre-existing one
  absolutely hassle-free by dismissing the need for
  more documentation.

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• You can simply avail additional funding on the
  same loan thereby minimizing time, effort and
  cost.
• Your existing basic documentation and collateral
  is sufficient to provide you more funds!
• You just need to provide minimal papers to avail
  the top-up loan.

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When to use a Top-up and the Conditions Applied
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When would you Opt for a Top-up Loan?
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• For instance, you had taken a housing loan of
  Rs.40 lakh five years ago for a term of 15 years.
  
• Your current outstanding on the loan is 35 lakhs.
  
• Now, you want to carry out major renovation in
  your house and you need a loan to carry out such
  renovation.
• You are thinking about a personal loan from a
  finance institution.
• This is when a Top-up loan over your Home Loan
  comes into picture.

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The Conditions Applied
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• There needs to be a pre-existing Housing Loan
  with the financial advisory firm or institution
  to avail the Top-up loan.
• Requirement of at least a 6-12 months repayment
  record on the existing home loan.
• Permissible top-up Loan amount is 70-75 of the
  present market value of the property less the
  outstanding home loan amount.

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Benefits of a Top-up Loan
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• Apart from being hassle-free the top-up loan has
  various other benefits.
• Its primary benefit is that it is offered at a
  lower Home Loan Interest Rate as compared to a
  Personal Loan.

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Secondary Benefits of a Top-up Loan
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• To add to it, the icing on the cake is that you
  are not monitored by the company with regards to
  the usage of such top-up Loan proceeds.
  Therefore, you can use the fund as you wish!
• You can use the funds for home renovation as
  mentioned earlier, paying off a personal loan,
  childrens education etc.
• The finance institution might only ask for an
  undertaking specifying the exact use to ensure no
  illegal usage of the top-up loan funds.

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• Tax benefits of a home loan top up are dependent
  on the purpose for which the loan is utilized.
• You will be eligible for tax benefit under
  Section 80C (for principal repayment) and under
  Section 24 (for interest payment) only if you use
  the loan proceeds for purchase or construction of
  a new residential property.
• However, if the top up fund is used for any other
  purpose you shall not be eligible for any tax
  benefits.

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Thank You